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Thursday, May 10, 2012

Incentives

Our healthcare system is set up backwards. You see, with insurance companies standing between patients and health care, the patients don't see the direct or total costs of care. We think that it costs only the $20 co-pay instead of thinking about the $200 visit to see the doctor, not counting any lab work or procedures. This disconnect drives prices higher on the insurance company end because we use more services than we really need. Do people who frequent the ER really need emergency care? Not more than half the time. Urgent care or calling for a standard doctor's appointment would suit most patients' needs with much less cost. The real cost of going to the ER is upwards of $1000 if not more, depending on which hospital and where it is, etc. Not a $50-$100 co-pay. The cost to the consumer has been disconnected from the cost to the provider and is hidden within the continually escalating health insurance premiums.

Why are ER costs so high? Well, beyond the more expensive equipment and maintenance costs, the ER is required to provide care to anyone who walks in the door. Illegal aliens use the ER for all care, and rarely pay their bills. People with insurance are billed higher so cover for the losses the ER takes from people who abuse the system by not paying at all, and to some degree to recoup losses from Medicaid and Medicare reiumbursments, which would otherwise cost the hospital and drive them out of business. Which we have seen in some neighborhoods around the country.

This plus the lack of tort reform have led to highly escalated medical care costs compared to other nations. Doctors practice defensive medicine - ordering the most up-to-date tests - to cover their behinds in the event of a multimillion dollar lawsuit. If they don't do 'everything possible' for each patient, their overall quality of care won't stand up in court. When it comes down to it, this brings the costs up for the patient because of the doctors ordering more tests and procedures than are really necessary. But again, since the patient pays co-pays and not a percentage of the total cost the patient isn't seeing this increase except in the cost of higher premiums from the insurance company who foots the bill and raises costs year by year to stay solvent or profitable as the case may be.

Obamacare doesn't change these problems. If anything, it exacerbates them by requiring health insurance companies to cover more procedures at less cost to patients (hah), and making catastrophic health insurance plans much harder to get if you can get them at all. This really means that Obamacare forces premiums to be higher, to make up that difference. Which contributes to the cycle of thinking, "If I have to pay so much for health care then by golly I'm going to see the doctor every chance I can!" Which is backwards. This escalates the health insurance premiums indefinitely because the health insurance companies keep taking more losses and eventually fold, leaving only the undesirable public option.

The other thing Obamacare does in the short term (besides not touching tort reform, but then again it was crafted by lawyers who made millions by suing doctors) is it increases Medicaid. Let me tell you more about the structure of Medicaid, which is backwards once again, to a greater or lesser degree depending entirely upon the state.

Once upon a time I lived in the liberal city of Chicago. Illinois Medicaid is graded, but if you make less than a certain amount per member of the household, all health care expenses are free - well, free to you but certainly not free for the taxpayers of Illinois. Do you know what this means in practice? This means that the people who are on Medicaid (largely unwed teen mothers in the South Chicago area) abuse the system. Rather than seeing the doctor for primary care, they go the ER. The Chicago ERs are full of people with sick children who really need to be home in bed rather than seeing any doctor at all! I've already talked about what this does to the hospital in terms of staying in business. Since the Medicaid patients aren't seeing any of these costs, they don't think at all what they are costing the Medicaid system or taxpayers in general. If they were instead requirement to pay something, the incentive to think twice about what sort of care is necessary could really ease the strain on public programs such as Medicaid. To pay nothing at all creates unnecessary irresponsibility with other people's money.

To see a doctor on Medicaid, you may end up waiting a long, long time for an appointment. This is particularly true of specialists, but not as bad for primary care. The offices that take a majority of Medicaid patients aren't as fancy or up-to-date but they are adequate. They may take a longer time to see you but you are seen. I think we could safely say that if Obamacare drives all insurance companies out of business (supposing it is not ruled unconstitutional or repealed) then we are all headed to a system more like Medicaid and less like the quality and accessibility those on private insurance are accustomed to having.

Obamacare also cuts Medicare. The cuts are made to the doctors and hospitals directly rather than to the patients, but it doesn't matter. It affects patients too. The cuts create incentives for doctors and hospitals to treat Medicare patients as briefly and cheaply as possible. NOT consistent with quality care. With the lack of tort reform, it will be a real balancing act for doctors to care for their patients and keep costs down enough to stay in business while accepting Medicare patients at all. This is bad for Medicare doctor availability and accessibility. Tons of doctors have left practice early rather than face this future.

What are some possible solutions? Well, first of all we must get rid of Obamacare if the Supreme Court doesn't. Second, we need to insert the free market into the system. Insurance companies should have incentives to compete with each other for creating health care plans on a variety of levels. Catastrophic, basic, premium, family, etc. They should be able to compete across state lines because some states have laws more suited to keeping costs down than others. People should probably be required (incentives) to pay some percentage of their health care rather than only co-pays up to some certain deductible on a plan, because then patients would have the incentive to ask around for how much different procedures or appointments will cost them. I've already seen some insurance companies who provide free health screenings and provide exercise and nutrition programs to help people not need the kind of health care required after developing diabetes, for one example. In short, doing the opposite of what Obamacare does ought to ease the economic burden of healthcare for Americans.

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